Setting Up an Employee Financial Counseling Program

The roller-coaster ride that has been the stock market over the past few years has left many employees with questions when it comes to managing their portfolios and retirement accounts. To help them find answers, an increasing number of employers are providing financial counseling.

These employee programs provide help with portfolio management, overall personal and family money management, and retirement planning. Along with the need to save for their own retirement also comes the responsibility to make wise investment decisions, something many employees are woefully unprepared to do.

In the past, many businesses were hesitant to offer financial assistance to employees out of fear that they could be held liable if employees lost money due to any advice rendered. But in 2006, a change in pension law provided employers with some liability protection, which has enabled businesses to provide financial counseling with little fear of employee redress.

For their part, many employees welcome such programs. In a survey conducted by MetLife, 44 percent of respondents said they are interested in receiving financial planning help from their employers. Businesses benefit, too, as studies have shown that financial counseling programs tend to increase employee loyalty and boost retention and productivity.

Employee financial counseling programs can be offered in several different ways: online, in group seminars presented by professional investment advisory firms, or in one-on-one appointments between employees and financial planners. The cost depends mainly on the level of personalization provided and the total number of employees participating.

Choosing the Right Financial Advisor

It’s important to note that as the sponsor of an employee retirement plan, your company has a fiduciary responsibility to carefully monitor the financial and investment advice and education employees receive through your business. This makes it critical that you exercise proper due diligence and care when selecting who will provide counseling.

Start with the firm that is providing administration of your 401(k) or other employee retirement plan. Over the past couple decades, many businesses have shifted from contributing most of the funds toward employees’ retirement accounts to retirement plans in which employees are mostly responsible for their own savings through vehicles such as IRAs and 401(k)s. Many plan administrators now offer programs for employee education that range from group seminars (both in person and online) to individualized counseling sessions.

Federal laws specify what kinds of counseling and advice can and cannot be shared with employees. For example, advisors are prohibited from making specific recommendations of investment products or offering advice with regard to specific stocks, mutual funds, or other investments.

However, advisors are permitted to discuss broad types of investments (such as mutual funds, individual stocks and bonds, exchange-traded funds, and money market accounts) with employees and how they might allocate assets within their portfolio or retirement accounts. They can also let employees know which funds and other investments they offer and analyze.

As additional protection, you could require employees to sign a waiver acknowledging they understand that the advice they receive is general in nature and that they are personally responsible for their own investment decisions, as well as the financial consequences of those decisions.